Thursday, December 4, 2008

Should attorney have to pay restituion after filing for bankruptcy?

Here is an interesting case decided today by the Ohio Supreme Court. A lawyer accepted a case he was clearly not qualified to handle. He was incompetent in handling it and given his failure to adequately respond to motions for summary judgment, the case was dismissed. The client then sued for legal malpractice and obtained judgment in his favor. However, the client was unable to collect on the judgment because the lawyer had failed to notify his insurance carrier, who then asserted its right to deny coverage. The client was also unable to collect from the lawyer because the lawyer avoided the judgment by declaring bankruptcy and securing a discharge.

The Ohio Supreme Court found that the lawyer acted out of self-interest, harmed a vulnerable client, and failed to make restitution. It recognized that a number of courts in other jurisdictions have ordered restitution to a client as a condition of a disciplined attorney’s reinstatement to practice, notwithstanding a discharge in bankruptcy of the underlying debt. However, it also noted an older case in Ohio which held that the bankruptcy discharge prevents the court from ordering restitution. Following this precendent, the Court concludes:

"Ordering respondent to pay restitution would further respondent’s rehabilitation, . . . but . . . we do not order it here. To safeguard the public and deter other unseasoned lawyers from unsupervised practice in areas in which they have insufficient legal expertise, we suspend respondent from the practice of law in Ohio for two years and order a stay of the last 18 months on the condition that respondent completes an 18-month probation, monitored by an [appointed] attorney . . . During the probation, respondent shall, in addition to the other requirements of that rule, accept only cases within his experience level or arrange for competent co-counsel."

In a separate opinion, one of the Justices argued the precendent case is wrong and that the attorney should be required to pay restitution as a condition to reinstating his law license. Finally, in another separate opinion, another Justice argued for stricter penalties. The full text of the (not yet officially published) opinion is available here.

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